tv Nightly Business Report PBS October 25, 2012 7:00pm-7:30pm PDT
>> this is nbr. captioning sponsored by wpbt >> susie: good evening, everyone. i'm susie gharib. 26 million iphones, 14 million ipads, and 5 million ipods sold, but that wasn't good enough for investors-- they dump apple shares. >> tom: i'm tom hudson. microsoft's windows 8 makes its official debut. from the desktop to the tablet, microsoft says it works seamlessly across all computers. >> susie: and going up-- why there's a construction boom of rental apartments in the nation's capitol. >> tom: that and more tonight on nbr! >> susie: investors soured on apple tonight-- the stock tumbled as much as 2%, dipping
below $600 in after-hours trading. a rare earnings miss was the reason. the lower than expected numbers came just days after all the hoopla over apple's launch of the new ipad mini. apple earned $8.67 a share, eight cents below estimates. revenues came in higher than expected, almost $36 billion. on top of that earnings disappointment, the company gave a less rosy forecast for the future. suzanne pratt takes a closer look. >> reporter: wall street called this a throwaway quarter for apple. after all, the iphone 5 was only available for one week during the period, and the newly launched ipad mini has yet to hit stores. still, apple sold nearly 27 million iphones during june- through-september quarter, well more than expected. experts say apple's biggest problem was that it couldn't make enough iphones. >> iphone 5 is going to continue to be an absolutely huge product. one thing iphone 5 has that the
tablets don't is subsidies. because iphone is sold be carriers, you can get that up-front price down to $199. >> reporter: as for ipad sales, they were a bit sluggish in the quarter. that's because there was a bit of a pause in demand ahead of the tinier tablet's release. consumers bought 14 million ipads in the quarter, somewhat less than anticipated. despite the company's solid quarter, there are concerns about growing competition. that's as the era of apple dominating certain categories has passed. >> we used to say there's no tablet market, there's just an ipad market. done, over. amazon, google, on the second tier, people like barnes and noble, samsung-- there's serious competition now, and they're taking more and more of the market. >> reporter: the timely launch of the iphone 5 and ipad mini sets the stage for a huge quarter for apple in the last few months of this year.
the company is counting on at least one apple product under the tree this christmas. suzanne pratt, nbr, new york. >> susie: microsoft is also banking on big christmas sales. it unveiled its much anticipated new operating system, windows 8, here in new york city, and showed off its new tablet, the surface. the operating system's key feature-- an ability to work across all computers: tablets, laptops and desktops. over one billion hours of testing time went into the new operating system and the surface tablet. c.e.o. steve ballmer calls them a milestone in computing. >> with windows 8, we've brought together the best of worlds-- the p.c. and the tablet; your work, life, and play. windows 8 will help you do everything, and it will make it a lot of fun, frankly, to do nothing.
one device now combines the greatest qualities with the p.c. with the greatest qualities of the tablet experience. >> susie: joining us now with more on tablets, and those apple earnings, david garrity, head of his own tech research firm, gva research. david, you have been a real strong recommender of apple stock. any change in your thinking because of those earnings today and the disappointment? >> susie, no. for a couple simple reasons. first off, apple with their announcement earlier this week not only of the ipad minibut also of their new imac is probably going have the strongest product line set up for the year and holiday shopping season that we've seen probably in the last ten years of the company, if ever. and from that standpoint we think that there are cost incurred in the quarter to make sure that this product offering was in place and available to consumers. as a result, analysts have always been surprised, already, by how strong the guidance is for revenues in
the december quarter. we think that apple has a chance to improve their margins against these higher revenues. >> susie: david, first i just want to apologize that you are coping with a lot of music in the background, the new york stock exchange is holding an event. we really appreciate your patience. you have been forecasting $800 on apple stock. what's going to drive that higher? is it all of these new consumer products that you've been talking about? >> yes, it's straight from the product portfolio and the fact of profit margins improving as the company ramps up production of these products. and the fact that even though there may be competitors out there claiming that they have come out with products such as windows 8 that will improve the functionality of competing products, we don't think that they are there yet and we know also at the same time that apple continues to innovate and improve functionality and not necessarily, you know, raise price points, so from that standpoint there really isn't much of a price
umbrella for competitors to come in under to attack ale's position. >> susie: so you don't think that this new windows product, the surface say threat to amazon whether it on the actual product or the price s that what you are saying? >> well, one, however much steve bomber after 31 years at microsoft might want to say that this is his legacy product with windows 8, apple certainly has a very substantial advantage in the marketplace. and the price point on the surface tablet at approximately $645, obviously faces a fair amount of competition directly from apple. the point was made earlier that there are subsidies provided not just for iphones but also for ipads as well about from that standpoint there are other elements of competition going against microsoft products from apple, that microsoft hasn't been able to deploy in response. >> we have less than a minute, and i do want to ask you about amazon. amazon reported after the bell today a bigger loss than expected, and the stock also fell sharply in after
hours trading. what are your thought on those numbers that came out and the stock as well? >> the reason for the first loss in the third quarter which was amazon's first since 2003 in the third quarter was the fact that the company has been building out their warehouse distribution network very aggressively. this is a company here which is focused primarily on gaining market share first and foremost, we'll have to see when the profits follow. in the mean wile we think that amazon shares are fairly richly valued. they have had a good run this year and we wouldn't be aggressive in terms of going out and pursuing amazon at these levels. whereas with apple we think had a pullback which we've seen the stock apple is attractive. >> all right, thanks a lot. great information. any disclosures to make on amazon or apple or microsoft? >> i own ame, i own microsoft, oy do not own amazon. >> susie: all right, thanks for that. david gate, gva research.
>> reporter: i'm sylvia hall in washington, where developers are busy building thousands of new apartments. i'll show you what's driving the demand in one of the country's hottest rental markets. >> tom: ahead of those big apple results, investors were busy plowing through a host of earnings and some so-so economic reports. new claims for jobless benefits fell by 23,000 last week to 369,000, showing continued slow improvement in the labor market. on wall street, the dow rose 26 points, the nasdaq and the s&p both tacked on four. americans were back buying big ticket items last month. durable goods orders jumped almost 10% in september. durable goods are things designed to last more than three years, like washing machines, televisions and airplanes. the jump last month couldn't offset the 13% drop in the same kind of items in august. but what about smaller everyday items? well, one of the biggest makers of consumer goods, procter & gamble, posted a 2% jump in
sales. earnings were better than estimates, despite p&g losing market share on more than half of its product lines. erika miller reports. >> reporter: the results at procter & gamble weren't exactly "head and shoulders" above last year, but at last there was a "bounce". the world's largest consumer products company reported earnings that were ten cents a share above expectations. but revenues came in a little light at $20.7 billion, compared to nearly $22 billion last year. that said, many wall street analysts were pleased by the results. commodity costs fell, and the company was able to regain some of its lost market share. >> i think their execution has become a little bit better, so they've been smarter about where they take prices and where they cut prices and how they're marketing their products in certain categories. so that's helped stem some of the market share losses that have plagued them over the last couple of quarters. >> reporter: but he does not see
much upside for the stock, which has risen about 14% since june. consumer product companies are facing big challenges due to the global economic slowdown. they have depended on markets outside the u.s. for growth, and now they're getting hurt by the debt crisis in europe and cooling growth in china. so it's no surprise that colgate palmolive's earnings were less than sparkling. the toothpaste giant earned a $1.38 a share in the third quarter, in line with estimates, and up from last year. but, like p&g, colgate's revenues fell short of expectations and were also lower than the year-ago level. the company also announced a four-year restructuring program that will slash its global workforce by 6%. often, a company's stock will rally on cost-cutting news, but that wasn't the case for colgate today. >> while that's generally good news in terms of freeing up money for investment, it's probably making the market a little bit nervous that they need sort of extra cost savings on top of their traditional program in order to hit numbers.
>> reporter: his firm has done business with colgate in the past 12 months. so it seems it will take a rebound in the global economy to really turn the "tide" in favor of consumer products stocks. erika miller, nbr, new york. >> tom: john san marco is an analyst with janney montgomery scott. john san marco joins, i want to focus on procter & gamble. profits were helped by cost cuts and cheaper commodity prices but isn't there a limit to that? >> yes, sure, there absolutely is. all the more reason they really need to accelerate revenue growth off of the 2% rate of growth they're going through right now. >> tom: not exactly all that encouraging, that growth rate. and when you break it up net sales across all of its major product lines actually fell, net sales did, all down. so how much of this is the environment, the consumer that p&g is trying to grab
and how much is procter & gamble itself? >> well, to be fair, the number you quote includes the effective currency which of course they can't control and of course all their competitors face as well, including the effective currency. they were up in four out of five categories. and that still is not enough. i think to reward shareholders they need to invest in a way that they can get all five businesses growing, and accelerate that organic growth rate to mid single digits. >> tom: talk about that investment. because p&g is known for big spending on marketing, advertising, research and development. so is it forsaking kind of these future investments in order to show better earnings now? >> so it's along the lines of those investments they've always made an ample quantities. and you know, additionally this is a portfolio that was sort of built for a bygone consumer era where consumers had a lot of exses money to
trade up to the next best tube of toothpaste or next best diaper. and the more effective laundry detergent. that environment is gone, unemployment hovered around 8% or higher for several years in far worse conditions elsewhere in the world so now the investment basket they have to free up capital in order to invest in their pricing, to make sure that price is a consideration. >> and this comes at a time with significant public1f hedge fund investor william-- has stepped up his public pressure on p amp g to increase more value to share holders. it seemed to have worked. will it work long term? >> yeah, i think is a product of a couple of things. i think number one we are now in year four or year five of the consumer shift. you know, we talked about. and you know, procter & gamble in year four, year five of investing
aggressively to get their value propositions right. like he you eluded to i suspect there is a greater sense of urgency in cincinnati to let some business upside flow to the bottom line and rewardñr shareholders today as well as over the long term. >> john, you've got a buy rating on the stock. dow own any yourself? >> i do not. >> john san marco along with us. he is an analyst with janney montgomerie scott. >> susie: from aetna to honeywell and goldman sachs, more than 80 chief executives from some of the nation's biggest companies are calling on
lawmakers to cut the federal deficit. they're working with a non- partisan group called "fix the debt," which rang the opening bell here at the nyse today. the group's mantra-- "inaction is not an option." the c.e.o.s want congress to get a plan in place to deal with the debt as soon as the election's over, or risk a further loss in business confidence. fix the debt is chaired by former senator alan simpson and erskine bowles, the same men the president tapped to lead the national commission on fiscal responsibility. it's a very important issue for their businesses. >> tom: many months ago they were reprimanded for to the being more vocal about the fiscal situation in the united states. and here at the are on the eve of the presidential election getting their voices heard, certainly. let's get going with tonight's "market focus." the major indices squeezed out some small gains after the sharp losses since late last week. the s&p 500 started strong with the market focused on the strong
durable goods report for september and the drop in first time unemployment insurance filings last week. but those gains disappeared by noon eastern time; the index finished with a small gain. trading volume was 695 million shares on the big board; 1.94 billion on the nasdaq, the energy sector led the way, up nine tenths of a percent. health care rebounded eight tenths of a percent. and helped by procter & gamble, the consumer staples sector gained six tenths of a percent. a pair of independent energy companies helped that sector, even though they both reported weaker than anticipated quarterly earnings. oil and natural gas producer eqt rallied 4.7%. while earnings came up short, production sales volumes were up double digits. higher sales volumes also helped noble energy shares rally 3%, even though noble also had earnings. disappointing quarterly earnings. helping health care today was a drug deal for pharmaceutical wholesaler mckesson.
mckesson has a deal to buy pss world medical. pss sells medical instruments and other products. the offer is $29 per share, or $1.4 billion. the market likes the deal, pushing the price of mckesson stock up 4.1%. pss world shot up more than 32%, closing just shy of the buyout price. a healthcare stock to watch tomorrow may be health technology firm cerner. after closing at $68.47, the stock shot up to $76 in extended hours trading. strong earnings, record revenue and an improved outlook get the credit. while procter & gamble helped consumer stocks, the drag was baby formula maker mead johnson nutrition. disappointing earnings and a cut to its outlook sent shares tumbling. they finished down 8.6%, hitting a new 52 week low. blame for the weak outlook was spread across the globe, from china and europe to the united states.
best buy also sees tough times ahead. late yesterday, the retailer warned both earnings and sales at stores open for at least a year would fall in its third quarter. the warning comes just as the holiday shopping season gets underway. shares fell 10.3% as volume quadrupled, this close to a decade low. the company took the opportunity to announce a management shuffle under new c.e.o. hubert joly. he took over in august. best buy has not been helped out by an improving housing market. we heard from two home builders today about their latest quarters. pulte group shares fell 2.5% after reporting its highest quarterly earnings since the housing boom. new orders and higher prices helped. shares have more than tripled in the past year, so we may be seeing some profit-taking. ryland group shot up to a new post-recession high, thanks to its own stronger than expected third quarter financial performance. its backlog of orders for new homes is up 58% as a strong sign of future construction. four of the five most actively
traded exchange traded products were higher, led by the 1% gain in the emerging market fund. the s&p 500 volatility note fell, as it usually moves in the opposite direction of the broad market. and that's tonight's "market focus." >> susie: americans continue to sign contracts to buy homes, but the pace has slowed down. the national association of realtors says its pending sales index barely budged last month, up only three tenths of a percent. but contracts are up almost 15% over the past year. and housing developers all
across the country are feeling confident, especially about the future of building apartments and condos. one place that's really booming- - the nation's capital. sylvia hall continues our coverage of the housing market. >> reporter: it may not look like much now, but next year, this site will be the swanky home to 314 luxury apartments and town homes, complete with a rooftop pool, garden, and gym. it's one of the many projects fueling a construction boom across the nation's capital. demand for rental housing is rising across the country. but edward wolynec, a v.p. with the company behind this project, says it's even more prominent here in washington. >> the district attracts highly educated people, renters of choice, people that enjoy the flexibility of renting and want a high-quality housing experience, but want to be able
to go ahead and pick up and move if they get a better job offer or they're going to back school or what have you. >> reporter: the city's population has shot up in the past decade. and these days, it gets about 1,000 new residents each month, most of them young professionals. so it makes sense that apartment development is moving fast. more than 8,000 apartments are under construction in the city right now. that's the largest number since at least the '90s, and the pipeline for new projects is much bigger. a lot of the projects underway right now are going to be finished at about the same time. that leaves some people to wonder if the extra supply will actually lower rent rates. >> we are likely to see an increase in concessions or specials, in terms of three months rent or waiving fees. so from a renter's standpoint or point of view, they will have more choices and likely will have some costs savings, minimally over the next couple of years. >> reporter: but across the country, rents have soared in recent years. last year alone, they increased more than 5%.
as prices rise, many here hope construction won't slow down. >> the buying power of higher- income households is driving up the cost of rents and home prices, so supply is absolutely an important part of addressing affordability. >> reporter: and in a city like d.c., developers are more than happy to help out. >> long term, the demographics for rentals in the district is very, very strong. we've got pent-up demand, we've got de-nesting of 5.5 million to six million young people who are living with their parents, we've got decoupling coming. and d.c. has had the strongest population growth of any state in the country. >> reporter: sylvia hall, nbr, washington.
>> susie: ford is closing three more plants in europe and cutting almost 6,000 jobs. the auto maker says sales are falling faster in europe than its original forecast. despite the worsening situation in europe, ford still expects to report a profit for this year and says its earnings that come out on monday will be better than the previous quarter. ahead of that, ford shares rose 2% to $10 and change. >> tom: auto dealer groups in massachusetts and new york are trying to pull the plug on tesla's company-owned dealerships. tesla makes pricey electric cars. it's applying for a license to open a dealership in massachusetts, but that license is being challenged by the state's auto dealers
association. the group says a tesla-owned store would violate the state's dealer franchise law, which doesn't allow auto manufacturers to own dealerships. new york city's auto dealer association is challenging tesla over similar plans. the company says it has worked closely with regulators to operate in compliance with all state and municipal laws. >> susie: tomorrow on nbr, our friday "market monitor" guest is a buyer, and says stock valuations remain reasonable. he's robert stovall, strategist at wood asset management. also tomorrow, quarterly results from chevron and merck. >> tom: education is one of the many issues president obama and governor romney sparred about in their presidential campaign debates. and tonight's commentator says there's an entire group of students that have been short- changed. he's todd buccholz, author of "rush: why you need and love the rat race." >> our schools have cheated and discriminated against a generation of students. when i was in high school, they
divided us into two tracks. the college prep kids read "beowulf" and "macbeth"; the other kids were shunted into so- called vocational education, where they learned how to build a house, change spark plugs, and wire air conditioners. of course now, most of us college kids can't even explain how a toaster works. so where was the cheating and discrimination? those vocational kids weren't taught enough. they should've been taught, not just how to build and fix things, but how to run a business. if you've been trained as a plumber and can snake a pipe, you might be able to make ends meet for your family. but if you've also learned how to open your own plumbing business, you can prosper. if you can understand the computerized diagnostics system for an auto assembly line, you become invaluable. we need more skilled trades people in america. there are many more job openings for welders than for "beowulf" experts. our schools should be honoring people who work with their hands. it's time to stop the discrimination, or we'll all end
up empty-handed. i'm todd buchholz. >> tom: that's "nightly business report" for thursday, october 25. good night, everyone. you, too, susie. >> susie: good night, tom. thanks for watching, everyone. we will see you online at nbr.com, and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org